When it comes to e-commerce in the APAC region, no one beats China for volume and revenue. But China’s e-commerce explosion spawned revolutions throughout the region, and the emerging markets of Southeast Asia are witnessing rapid online sales growth as well.
“Asia has emerged at the forefront of the global digitalization trend, with rapid growth of e-commerce, cross-border e-commerce and innovation,” says Miguel Warren, regional head of South East Asia, Payoneer Philippines. “The growth began with China … Chinese merchants have been leaders in taking advantage of the marketplace model to go global.”
But Payoneer, a digital payments company, is casting its gaze on both China and its southern neighbors. In its recent report, “Digital Economy in Asia: Insider’s Guide into the Global Opportunity,” the company identified key opportunities in places such as Vietnam, Malaysia, Thailand and the Philippines.
“Countries like Vietnam, and the APAC region as a whole, quickly moved to follow China’s lead. In the past couple of years, marketplaces like Lazada, Rakuten, Flipkart and Shopee have made it easy for Vietnamese merchants to sell online within the APAC region, and gave them the experience they needed to further expand around the world,” Warren says. “As these e-commerce merchants have matured, it has led to the explosion of growth we’re seeing now.”
Vietnam shows particular potential in the e-commerce space because of its economics and manufacturing history, Warren says. “Vietnam has a strong culture and a lot of experience with manufacturing and exporting. The local businesses have the foundation needed to produce goods for a global consumer base,” he says. He attributes Vietnam’s e-commerce growth to two additional factors: high internet penetration and an expanding workforce.
Vietnamese officials predict that the country’s e-commerce sector will grow 30-50% per year. Whether that prediction bears out, the appetite for online shopping is growing, and electronics and media and fashion will be key revenue drivers.
A young, tech-savvy market that brings its own set of challenges
In 2017, there were 53.86 million internet users in Vietnam, and predictions show that number reaching nearly 60 million in the next four years. The proliferation of mobile phones have accelerated e-commerce growth there and throughout the region. But mobile wallets play an integral role as well, particularly in developing markets where a high percentage of the population is unbanked. As of 2014, just 31% of Vietnamese held formal bank accounts, which can be a barrier to accessing goods and services.
However, as Garena Group President Nick Nash told McKinsey, mobile and PC wallets make a world of difference to e-commerce growth in Southeast Asia. Even consumers who don’t hold formal accounts can open a digital wallet and top them up via local vendors. The more e-commerce retailers that accept wallet-based payments, the greater access for Vietnamese consumers — and the greater profits for the sellers.
Miguel Warren (left), regional head of South East Asia, Payoneer Philippines, and Payoneer CEO Scott Galit want to capitalize on e-commerce potential in Vietnam. (Photo credit: Payoneer)
It helps that the Vietnamese population skews young. The median age was 30.4 in 2015, and young people here are increasingly educated, worldly and wired. That makes the country all the more attractive to online sellers. “Vietnam has a uniquely young population, and a very internet-connected one. This leads to consumers that are fast to adapt new trends and technologies, and tend to gravitate towards brands that are highly connected and engaged,” Warren explains.” Many are digital entrepreneurs themselves, and have an interest in moving the local business community forward.”
Nonetheless, Vietnam doesn’t offer a straightforward highway to riches. Warren says that despite the enthusiasm of Vietnam’s young and digitally engaged buyers, only 30% of internet-connected consumers have made online purchases. “The challenges and opportunities in Vietnam are closely connected,” he says. “While the Vietnamese population is more comfortable with e-commerce than many other markets, it still has a long path of growth ahead.”
Part of that growth will be accommodating local payment preferences and overcoming consumer skepticism about product authenticity. “Brands that find success in Vietnam will have to put more effort towards building the trust of the consumer,” Warren says. “There also need to be more investment into the logistics and payment infrastructure of the local market.” To that end, Payoneer has been developing on-the-ground partnerships in the country with the goal of building a payment network on which both retailers and customers can rely.
Vietnam still lags behind other markets in terms of e-commerce adoption and customer revenues. But with large e-commerce marketplaces such as Alibaba and Amazon continuing to make forays into the space — not too mention the native company NextTech looking to compete for dominance — it’s clear that e-commerce’s growth in Vietnam has only just begun.